A preferred provider organization, or PPO, is a type of managed care plan that contracts with a group of healthcare providers to create a network of participating providers. Providers participating in a PPO network agreed to provide services to plan members at pre-negotiated rates. PPOs typically cost less than point-of-service (POS) and health Maintenance Organizations(HMOs).
What is a PPO?
A PPO is a type of managed care plan. In a PPO, you can receive health care from any doctor or hospital that participates in the plan. You don’t need to select a primary care physician (PCP). You can also see specialists without a referral from your PCP. But, you usually pay less if you use doctors, hospitals, and other health care providers that belong to the plan.
There are two main types of PPOs:
- Indemnity plans. With an indemnity plan, you pay the provider yourself, and then you submit a claim to the insurance company to be reimbursed.
- Managed care plans. With a managed care plan, the provider is paid directly by the insurance company. The provider agrees to accept the insurance company’s payment as full payment.
- You can see any doctor or hospital that participates in the plan without having to select a PCP. And, you don’t need a referral from your PCP to see a specialist.
- You usually pay less for services if you use doctors, hospitals, and other health care providers that belong to the plan. These providers are called “in-network.”
- If you need emergency care while you’re away from home, most PPOs will still cover it even if the provider isn’t in their network.
- You may have to pay more for services if you go out of network – meaning you see a doctor or visit a hospital that doesn’t participate in your PPO.
Advantages of PPOs
One advantage of PPO plans is that you have the freedom to visit any doctor or hospital that you want. You don’t need a referral from a primary care physician to see a specialist.
Another advantage of PPOs is that you usually pay less if you use doctors, hospitals, and other health care providers that belong to the plan. These providers have agreed to charge lower rates to PPO members. You still get quality care, but at a lower cost.
For example, let’s say your PPO plan allows you to see any doctor you want. But if you go to a doctor who belongs to the PPO, you may only have to pay a $20 co-payment. If you go to a doctor who does not belong to the PPO, you may have to pay a $40 co-payment. You would also have to pay more for any tests or procedures done by the out-of-network provider.
Disadvantages of PPOs
There are some disadvantages to consider when you’re looking at PPOs, as well. One of the biggest complaints is that PPOs often limit the number of providers you can see within their network. This can be a problem if you have a favorite doctor that you don’t want to change or if you need to see a specialist that isn’t in the network. You may also have difficulty finding a provider in your area if you live in a rural location.
Another downside to PPOs is that they often come with high deductibles and coinsurance rates. This means that you will be responsible for paying a certain amount of money out-of-pocket before your insurance coverage kicks in. Coinsurance is the percentage of medical costs that you are responsible for after your deductible has been met. For example, if your coinsurance is 20%, and you have a $100 doctor’s visit, you will be responsible for paying $20 and your insurance company will pay the other $80.
One final disadvantage of PPOs to consider is that they may not offer as much coverage for out-of-network providers as they do for in-network ones. This means that if you need to see a specialist who isn’t in your network, your costs could be significantly higher than if you had seen someone in-network.
After weighing the pros and cons, you may decide that a PPO is the right choice for you. Be sure to shop around and compare plans in your area to find the best coverage and provider options for your needs.